Regions Northeast | New York
Aug 13, 2008
By: Dees Stribling, Contributing Correspondent
Boston Properties and its partners have closed on the acquisition of 540 Madison Ave. and Two Grand Central Tower in New York City for about $705 million, a major part of the $3.95 billion, four-property portfolio deal that it struck with beleaguered seller Macklowe Properties earlier this year. The larger deal, as reported by CPN in late May, also involved the sale of the iconic GM Building in New York, which closed in June. Its purchase price, $2.8 billion, included the assumption of $1.9 billion in debt maturing in 2017.
540 Madison Ave. is a 39-story, 292,000-square-foot building at Madison Avenue at 55th St. in Manhattan. Two Grand Central Tower is a 44-story mid-block tower that runs from 44th to 45th Street between Lexington and Third Ave., totaling about 664,000 square feet.
The acquirer is a joint venture among Boston Properties, US Real Estate Opportunities I L.P., which is a partnership managed by Goldman Sachs, and Meraas Capital L.L.C., a Dubai-based private equity firm. Boston Properties has a 60 percent interest in each venture, and will receive fee income for property management and leasing services for the JV.
The deal is part of the continuing fallout of the credit crunch. Macklowe Properties, which borrowed heavily prior to the subprime meltdown to finance billions in acquisitions of office buildings that formerly belonged to Equity Office Properties Trust, was caught post-meltdown with no viable options when it came to refinancing the debt.
"Lenders are being very discriminating regarding the assets they are underwriting," Doug Linde, president of Boston Properties, said late last month during a company conference call, though not talking specifically about Macklowe or the New York office portfolio deal. "Sponsorship and relationships really matter today. Any asset with major rollover or vacancy is going to require significant equity and recourse from a well-capitalized sponsor, assuming it still covers debt service."
Presumably, with deep-pocketed foreign investors (among others) involved, Boston Properties will not face the same sort of problems as the seller. The $705 million total for the two properties just closed includes about $309.9 million of assumed indebtedness. The debt includes: for 540 Madison Ave., two secured loans with an aggregate principal of $119.9 million and fixed interest rate of 5.2 percent, each of which matures in July 2013; and for Two Grand Central Tower, a $190 million secured loan with an interest rate of 5.1 percent, which matures in July 2010.
Boston Properties also said that it expects to complete the acquisition of 125 West 55th Street, the fourth and final property in the portfolio from Macklowe, in short order. The price for for that structure is about $444 million, including the assumption of $263.5 million of secured and mezzanine loans having an average interest rate of 6.31 percent, all of which mature in March 2010.
By: Dees Stribling, Contributing Correspondent
Boston Properties and its partners have closed on the acquisition of 540 Madison Ave. and Two Grand Central Tower in New York City for about $705 million, a major part of the $3.95 billion, four-property portfolio deal that it struck with beleaguered seller Macklowe Properties earlier this year. The larger deal, as reported by CPN in late May, also involved the sale of the iconic GM Building in New York, which closed in June. Its purchase price, $2.8 billion, included the assumption of $1.9 billion in debt maturing in 2017.
540 Madison Ave. is a 39-story, 292,000-square-foot building at Madison Avenue at 55th St. in Manhattan. Two Grand Central Tower is a 44-story mid-block tower that runs from 44th to 45th Street between Lexington and Third Ave., totaling about 664,000 square feet.
The acquirer is a joint venture among Boston Properties, US Real Estate Opportunities I L.P., which is a partnership managed by Goldman Sachs, and Meraas Capital L.L.C., a Dubai-based private equity firm. Boston Properties has a 60 percent interest in each venture, and will receive fee income for property management and leasing services for the JV.
The deal is part of the continuing fallout of the credit crunch. Macklowe Properties, which borrowed heavily prior to the subprime meltdown to finance billions in acquisitions of office buildings that formerly belonged to Equity Office Properties Trust, was caught post-meltdown with no viable options when it came to refinancing the debt.
"Lenders are being very discriminating regarding the assets they are underwriting," Doug Linde, president of Boston Properties, said late last month during a company conference call, though not talking specifically about Macklowe or the New York office portfolio deal. "Sponsorship and relationships really matter today. Any asset with major rollover or vacancy is going to require significant equity and recourse from a well-capitalized sponsor, assuming it still covers debt service."
Presumably, with deep-pocketed foreign investors (among others) involved, Boston Properties will not face the same sort of problems as the seller. The $705 million total for the two properties just closed includes about $309.9 million of assumed indebtedness. The debt includes: for 540 Madison Ave., two secured loans with an aggregate principal of $119.9 million and fixed interest rate of 5.2 percent, each of which matures in July 2013; and for Two Grand Central Tower, a $190 million secured loan with an interest rate of 5.1 percent, which matures in July 2010.
Boston Properties also said that it expects to complete the acquisition of 125 West 55th Street, the fourth and final property in the portfolio from Macklowe, in short order. The price for for that structure is about $444 million, including the assumption of $263.5 million of secured and mezzanine loans having an average interest rate of 6.31 percent, all of which mature in March 2010.
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